HAPPY HOLIDAYS: IT’S TIME TO REFINANCE

George Lopez |

rates graph

The Fed raises interest rates for the fourth time this year, signals two more rate hikes coming in 2019

With less than a week to go until Christmas, the Federal Reserve raised interest rates for the fourth time this year and deposited the equivalent of a giant lump of coal in President Trump’s Christmas stocking. In the process, the Fed revised its economic growth projection downward and signaled that the Fed will raise interest rates two more times in 2019.

In the wake of the Fed’s decision, the implications for home buyers and homeowners became crystal clear: the prime time to buy a house or refinance your current mortgage is now, before interest rates go up further in 2019. If you’ve been waiting until next spring to go house shopping, you’d be wise to speed up your timetable. Similarly, if you’ve got a home equity line of credit loan with a variable rate, or you’ve been planning to refinance to make major home renovations, you’d better run and not walk to refinance your mortgage and take advantage of low fixed interest rates…while they’re still low.

The lack of holiday cheer on the Fed’s part was widely anticipated. In its final Federal Open Market Committee meeting of the year, the central bank voted to raise the federal funds rate by a quarter percentage point to a range from 2.25% to 2.50%. Interest rates are now the highest they’ve been since 2008, and the latest rate hike is expected to lead to higher credit card bills for consumers as well as higher interest rates for home equity loans and car loans.

It’s well known that the Federal Reserve’s policy of gradually tightening monetary policy is in direct opposition to the wishes of the Trump administration. In the past few months, President Trump has been increasingly vocal in opposing further rate increases by the Fed, but his comments appeared to have no effect on the Fed’s decision today.

Although the Fed’s move was widely expected, reaction by the financial markets to the rate hike was swift and emphatic. The stock markets, which had been treading in positive territory all day long, immediately plunged into the red. Bond yields quickly dropped to their lowest levels in seven months, an indication that investors believe the economy is slowing down.

Rest assured, economists are not forecasting that the sky is falling. However, economists are quick to point out that the Federal Reserve has been fairly transparent in communicating what it intends to do with interest rates in the near future as long the US economy and the global economy continue on their present course. As a result, smart consumers need to take note and adjust accordingly. A quick call to a mortgage lender like Nutter Home Loans could save you real money, and the sooner you act the better.

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